Economic Analysis – Overview And Steps

By Author: Fabiola Groshan
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Economics is a social science and therefore has two basic aspects, one that is practical and another that is theoretical or analytical. What economic analysis does is to provide a more detailed overview of the economy, based on the lens of economists, as well as based on latest economic news and indicators. The analysis is very important because it is the premises of the economic policy, which is designed to achieve the economic goals of the society and improve economic performance. Keeping yourself informed about the economic situation in your country and around the globe is highly advisable, as it may turn out to affect your life in ways you wouldn't have even imagined.

So, basically economic analysis, which is also known as economic theory, is just a series of principles and laws that were created and formed through logical reasoning. Their goal is to help economists and analysts to perform an as accurate as possible examination of economic trends, situations or problems. It is a very important tool, without which any endeavor to improve economic performance would fail. However, the tools of economic analysis are ...
... quite general, as the theory has the purpose to interpret certain facts and then generalize them, which is why it is equally important to adapt the analysis to specific situations or to the latest economic news, so that the theoretical statements on cause and effect can be further put in practice, through the means of economic policy.

There are several steps that need to be completed in order to construct an economic analysis, the first of which is of course identifying the problem that you retrieve from the real world and the current situation. After that you formulate the hypothesis, which follows to be analyzed. The third step consists in creating a certain prediction, by logical reasoning and the final step would be testing the prediction or predictions you have made. It may not appear so, but this process is extremely important in today's world, which revolves around financial status and economy. With its help, you can explain certain economic phenomenon, make certain predictions about economic events or trends and asses the economic performance of several organizations or communities.

The 21st century has brought along many issues, such as poverty and inequality, globalization and e-commerce, that can be easily understood with the help of economic analysis. For example, it doesn't take an economic news buff to know that the most pressing problem of today's economic world seems to be the unequal distribution of resources between different countries and regions, which led to unprecedented progress in countries like China and India, while other regions have stagnated or even worse. The analysis helps us understand the factors that determined such inequality, as well as the inappropriate measures that have been taken without result and thus, be better informed about what;s going on in the world, because this eventually affects all of us to a lesser or greater extent. This is why economic news occupy such an important place and so much space in the news feed all over the world.

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